(Willamette Management Associates) discussed current issues in bankruptcy valuations during his session at the recent AICPA Forensic & Valuation Services Conference 2013 in Las Vegas. They are:
- There is no bankruptcy code definition (or standard) of the term “value”;
- The use of hindsight in the valuation is discouraged;
- The valuation analyst’s reliance on management-prepared financial projections is often questioned;
- The analyst’s selection of valuation variables is often questioned;
- Current interest rates may be considered reasonably low;
- The reasonableness of the analyst’s due diligence is often questioned;
- Consider all of the income tax effects on the debtor value;
- Use of industry valuation rules of thumb is often questioned;
- Performing the cash flow test within a solvency analysis; and
- Use of the market approach in an inactive market is often questioned.
These points are a small sampling of the expert information provided in A Practical Guide to Bankruptcy Valuation by Robert Reilly and Dr. Israel Shaked, available at BVR.
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